On Wednesday, Stats NZ released second-quarter consumer price index (CPI) data showing prices grew just 3.3 per cent in the year to June.
The headline figure is down from four per cent in the first quarter of 2024 and from 7.3 per cent two years ago at the height of New Zealand's post-pandemic inflation shock.
It's also tantalisingly close to the Reserve Bank of New Zealand's (RBNZ) target band of one to three per cent.
A return to that level is likely to trigger cuts to the official cash rate (OCR) of 5.5 per cent, where it has sat for more than a year.
Finance Minister Nicola Willis called the result "welcome news", with hopefully more to come.
"Treasury's Budget forecasts show an improving outlook for the latter part of this year, with inflation pulling back, interest rates dropping and growth recovering," she said.
The RBNZ will next consider the OCR at the end of August, with Saxo Australia's Charu Chanana suggesting the central bank could move as soon as then, citing weakness in demand.
However, non-tradeable - or domestic - inflation remains high, measured at 5.4 per cent for the year, with tradeable inflation flatlining at 0.3 per cent.
ASB senior economist Mark Smith said "highly restrictive OCR settings are generating significant traction" but most of the falls came through non-tradeables.Â
"The Q2 data confirmed generalised cooling, but with more of the heavy lifting done by tradable prices as the COVID-19 price premium unwinds," he said.
The headline figure of 3.3 per cent was below the market consensus of 3.5 per cent, and the RBNZ's own prediction of 3.6 per cent.
ANZ and ASB banks both tipped 3.3 per cent, as did consultancy Infometrics.
Speaking prior to the announcement, ANZ economist Henry Russell said a low CPI figure would "tilt the risks that way" towards cuts in 2024.
"Markets are pricing in 100 basis points of cuts by February," he said.
"(Data is) all pointing to weakness across the economy ... things are not looking good out there."
In the wake of Wednesday's release, ASB is forecasting rate cuts this year.
"In our view a 25bp OCR cut in November looks to be the bare minimum of what the RBNZ will need to deliver over 2024," Mr Smith said.
New Zealand has endured a double-dip recession over the last 18 months, with per capita GDP falling for six consecutive quarters.
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